New Mountain Finance Corporation · NASDAQ:NMFC
New Mountain Finance — Q4 2023 Earnings Presentation
36 slides from New Mountain Finance's earnings presentation, Feb 27, 2024
Slide 1: Earnings Presentation Q4 2023
Earnings Presentation Q4 2023 February 27, 2024 14
Slide 2: Important Notices and Safe Harbor Statement
Important Notices and Safe Harbor Statement This presentation contains forward looking statements, which are not guarantees of future performance, conditions or results, and involve substantial risks and uncertainties, including the current conflict between Russia and Ukraine, conflict in the Middle
Slide 3: Important Notices and Safe Harbor Statement (cont.)
Important Notices and Safe Harbor Statement (cont.) Yield to Maturity (“YTM”) at Cost assumes that the accruing investments in our portfolio as of each date are purchased at cost on that date and held until their respective maturities with no prepayments or losses and are exited at par at maturity.
Slide 4: Today's Presenters
Today’s Presenters Steven B. Klinsky John R. Kline Laura C. Holson Kris Corbett Founder & Chairman President & CEO COO CFO Joined Years at 24 15 14 November 2023 4
Slide 5: Chairman's Overview
Chairman’s Overview ▪ Q4 2023 adjusted net investment income (“NII”) of $0.40 per share exceeded our regular dividend of $0.32 per share – NMFC will pay a $0.04 per share supplemental dividend alongside the Q1 2024 regular dividend (1) • Represents the high end of the previously communicated expecte
Slide 6: Key Highlights
Key Highlights Financial Highlights Quarter Ended 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 Adjusted NII Per Share $0.35 $0.38 $0.39 $0.40 $0.40 NAV Per Share $13.02 $13.14 $13.14 $13.06 $12.87 Dividends Per Share(1) $0.32 $0.35 $0.36 $0.36 $0.46 Share Count - End of Period (mm) 100.9 100.
Slide 7: New Mountain Capital Overview
New Mountain Capital Overview New Mountain Capital (“NMC”) was founded in 1999 to focus on “defensive growth” business building and deep fundamental research $~50bn ~245 ~150 0 3bps Employees & Senior Investment Private Equity Bankruptcies Average Net Realized Loss Rate Assets Under Management(1) Ad
Slide 8: Differentiated, Defensive Growth Approach to Lending
Differentiated, Defensive Growth Approach to Lending Why NMFC? ACYCLICAL SECTORS(3) Where NMC has deep expertise “Defensive Growth” Strategy • Focused on investing in strong businesses in Other Specialty Chemicals & acyclical sectors Materials ERP 6% 8% • Achieving superior risk-adjusted returns des
Slide 9: NMFC by the Numbers
NMFC by the Numbers New Mountain Finance Superior Credit Quality Attractive Return Profile $3.0bn 95% 11% Green Annualized Div. Portfolio Size(1) Portfolio Risk Rating Yield(4) 15 Year Operating History 42% Avg. Loan to Value(2) 10% Annual Return Since IPO(5) Baa3 / 3bps Stable Average realized loss
Slide 10: Summary of Changes in Portfolio
Summary of Changes in Portfolio(1) Q3 2023 Risk Ratings Q4 2023 Risk Ratings (FMV as of 9/30/2023) (FMV as of 12/31/2023) Orange Red Orange Red Yellow Yellow 0.2% 0.2% 1.9% 1.4% 4.6% 3.9% Positions representing $27m improved in Rating Positions representing $1m worsened in Rating Green 93.3% Green 9
Slide 11: NMFC Portfolio – Risk Ratings
NMFC Portfolio – Risk Ratings (FMV as of 12/31/23) ($ in millions / company count) $80 / 4 $43 / 4 $5 / 3 Business Services $59 / 3 Education $21 / 1 National HME $3 / 1 Business Characteristics(2) (A = Best; C = Worst) Distribution & Logistics $21 / 1 Healthcare $13 / 1 Healthcare $1 / 1 C Packagin
Slide 12: Q4 2023 NAV Update
Q4 2023 NAV Update Q4 2023 NAV declined $0.09 per share (or 0.7%), excluding the impact of the $0.10 special dividend, compared to the prior quarter $0.06 $13.06 $0.04 ($0.30) ($0.10) $0.15 $12.87 ($0.04) Net $0.24 NAV Per Share Decrease Company $ / Share Applied Cleveland + $0.03 TriTech + $0.02 Ha
Slide 13: Credit Performance Track Record
Credit Performance Track Record ▪ Non-accruals represent just 1.7% of total portfolio FMV ▪ >$9 billion of cumulative investments since IPO have generated net realized losses of just $26 million ($ in millions) As of 12/31/2023 Cumulative Since IPO (12+ years)(1) Investments Investments FMV / Cost /
Slide 14: Total Value Generated for Shareholders
Performance Since IPO(1) ($ in millions) Since IPO in 2011, NMFC has distributed over $1.2 billion to shareholders while creating over $1.1 billion of total value $1,200 $1,102 NMFC has generated $1,217 million of Adj. NII, $26 million of net realized losses and $60 million of net unrealized losses
Slide 15: NMFC Relative Return Performance – Indexed Total Return
NMFC Relative Return Performance – Indexed Total Return May 19, 2011 (IPO) – February 23, 2024 Indexed Total Return 490.0 CAGR (IPO to 2/23/2024) S&P 385.2% 470.0 NMFC 10.1% 450.0 S&P 500 13.2% 430.0 S&P 500 Financials 11.5% 410.0 BDC Index 5.3% CS High Yield Index 5.2% S&P Fin 301.5% 390.0 370.0 35
Slide 16: Credit Market Conditions
Credit Market Conditions General Investing Environment ▪ Direct lending market continues to be one of the most resilient asset classes – Private credit loans benefit from secured debt structures, floating base rates, and attractive spreads Direct Lending Opportunities ▪ While deal flow continues to
Slide 17: Positively Exposed to Elevated Base Rates
Positively Exposed to Elevated Base Rates Elevated base rates provide a sustained uplift to core earnings power Asset Mix Liability Mix (Aggregate par value of ($1,808 million drawn as of 12/31/2023)(2) $2,520 million as of 12/31/2023)(1) Fixed 12% Fixed Floating 41% 59% 88% Floating Illustrative NI
Slide 18: Q4 2023 Originations
Q4 2023 Originations Portfolio Originations(1) ($ in millions) Amount Type of Company Industry ($'s Invested) Investment Spread PetVet Consumer Services $28.1 First Lien S + 6.00% Bomgar Software - IT Infrastructure & Security 20.1 First Lien S + 5.00% PowerGrid Business Products 18.0 First Lien S +
Slide 19: Portfolio Mix by Type
Portfolio Mix by Type (Fair Value as of 12/31/2023)(1) ~68% of the portfolio is senior in nature, up from prior quarter Common Equity & Other Positions(3) Common Equity & Other Positions(3) Preferred 8% Subordinated 7% Company FMV Edmentum $95.2 3% UniTek 73.4 Benevis 46.8 First Lien Debt Total Perm
Slide 20: Q4 2023 Investment Activity Roll
Q4 2023 Investment Activity Roll YTM at Cost(1) / Purchase(2) 11.8% 11.2% 11.8% 10.8% 10.9% 9/30/2023 9/30/2023 Q4 Originations Q4 Sales / 12/31/2023 PF for 12/31/2023 Repayments Base Rate Changes(3) Cost ($m)(4) $3,198.7 $3,198.7 $142.5 $256.8 $3,068.2 1 Assumes that investments are purchased at co
Slide 21: Portfolio Company EBITDA and Credit Statistics
Portfolio Company EBITDA and Credit Statistics (Dollars in millions) Portfolio Weighted Average EBITDA(1) $170 $160 $155 $150 $147 $144 $141 $138 $140 $130 $120 $110 $0 $100 Q4-22 Q1-23 Q2-23 Q3-23 Q4-23 Portfolio Credit Statistics(2)(3) 10.0x 9.0x 8.0x 6.7x 6.8x 6.7x 6.6x 7.0x 6.5x 6.0x 5.0x 4.0x 3
Slide 22: Diverse Portfolio
Diverse Portfolio (By Fair Value as of 12/31/2023) Top 15 portfolio companies represent $1,295.8 million, or 42.8%, of consolidated investments SLP III Benevis Net Lease 4.6% 4.5% Edmentum 3.9% 3.8% SLP IV 3.7% UniTek 3.0% Portfolio Names 2.7% Kaseya 96 Other Portfolio By Fair Value Companies 2.6% A
Slide 23: Balance Sheet Highlights
Balance Sheet Highlights Quarter Ended ($ in millions, except per share data) 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 Assets Portfolio $3,237.8 $3,286.9 $3,196.0 $3,128.4 $3,027.8 Cash & Equivalents 71.2 46.4 45.9 83.3 70.1 (1) Other Assets 46.0 45.7 55.1 67.9 61.3 Total Assets $3,355.0
Slide 24: Income Statement Highlights (Quarterly)
Income Statement Highlights (Quarterly) Quarter Ended ($ in millions, except per share data) 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 Investment Income Interest income $66.4 $71.2 $74.4 $74.0 $71.1 Dividend income 17.1 17.3 18.7 17.9 18.7 Other income 3.2 3.2 2.1 2.2 3.0 Total investment
Slide 25: Income Statement Highlights (Annual)
Income Statement Highlights (Annual) Year Ended ($ in millions, except per share data) 12/31/2021 12/31/2022 12/31/2023 Investment Income Interest income $185.9 $222.3 $290.8 Dividend income 61.0 64.8 72.5 Other income 18.5 18.1 10.5 Total investment income $265.4 $305.2 $373.8 Expenses (1) Manageme
Slide 26: Investment Income Detail
Investment Income Detail ▪ Our investment income continues to be predominantly paid in cash and generated by stable and predictable sources ▪ 99%+ of Q4 2023 non-cash interest and dividend income is generated by positions with a Green risk rating Quarter Ended ($ in millions) 12/31/2022 3/31/2023 6/
Slide 27: Dividend Summary and Coverage
Dividend Summary and Coverage Q1 2024 estimated adjusted NII expected to exceed our regular dividend of $0.32 per share and expected to generate a supplemental dividend of at least $0.02 per share (payable in June 2024) 123% 104% 103% 105% 102% 100% 99% 98% 100% 99% 98% 99% 99% $1.71 $1.53 $0.37 $1.
Slide 28: Diversified Leverage Profile
Diversified Leverage Profile (As of 02/15/2024, Amount Outstanding $ in millions) / Facility Size Interest Rate(1) Maturity Wells Fargo Credit Facility $321 / $730 Daily SOFR + 2.50% (0.0% SOFR floor) October 2028 (Wells Fargo / State Street / First Citizens) Deutsche Bank Credit Facility $186 / $28
Slide 29: Leverage Maturity Schedule
Leverage Maturity Schedule (As of 02/15/2024, $ in millions) Floating vs Fixed Debt Mix Debt Type Outstanding Debt Max Facility Size $875 Fixed 70% 49% $115 Floating 30% 51% $30 $468 $435 $416 $13 $300 $364 $18 $75 $730 $104 $100 $199 $5 $260 $280 $200 $135 $5 2024 2025 2026 2027 2028 2029 and there
Slide 30: Broad Industry Analyst Coverage
Broad Industry Analyst Coverage Bank of America Securities B Riley Hovde Group Janney Montgomery Scott Derek Hewett Bryce Rowe Erik Zwick John Rowan Keefe, Bruyette & Woods Oppenheimer & Co. Wells Fargo Securities Paul Johnson Mitchel Penn Finian O’Shea 340
Slide 31: Appendix
NIM] NEW MOUNTAIN FINANCE CORPORATION Appendix
Slide 32: Appendix A: NMFC Portfolio – Risk Rating Migration from Prior Quarter
Appendix A: NMFC Portfolio – Risk Rating Migration from Prior Quarter (FMV as of 12/31/23) ($ in millions / company count) Business Characteristics(2) (A = Best; C = Worst) C Healthcare $1 / 1 Specialty Chemicals $9 / 1 B Business Services $18 / 1 A ** Excludes Green to Green Migration ** Tier 4 Tie
Slide 33: Appendix B: Credit Performance
Appendix B: Credit Performance (2) (2) (2) NMFC Leverage Ratio NMFC Leverage Ratio NMFC Leverage Ratio Variance Variance Variance (1) (1) (1) Company (Vintage) Purchase Current + / (-) Company (Vintage) Purchase Current + / (-) Company (Vintage) Purchase Current + / (-) Company A (2018) 6.4x 3.0x 3.
Slide 34: Appendix C: NMFC Income Reconciliation
Appendix C: NMFC Income Reconciliation (in millions, except per share data) Year Ended (unaudited) IPO - 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 GAAP net investment income ("NII") $490.5 $106.0 $117.2 $117.3 $118.8 $119.6 $159.9 Non-controlling interest in NMNLC related to NII
Slide 35: Appendix D: Performance Since IPO Detail
Appendix D: Performance Since IPO Detail IPO - ($ in millions) 12/31/2017(1) 2018 2019 2020 2021 2022 2023 Regular & Supplemental Dividend (2) $475.1 $103.4 $117.4 $120.1 $116.5 $122.4 $154.8 Cumulative Regular & Supplemental Dividend 475.1 578.5 695.9 816.0 932.5 1,054.9 1,209.6 Adj. NII(3) 477.4 1
Slide 36: INIMIF]
INIMIF] New MountTAIN FINANCE CORPORATION